Delaware | 1-3473 | 95-0862768 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
19100 Ridgewood Pkwy San Antonio, Texas | 78259-1828 | |
(Address of principal executive offices) | (Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
(d) | Exhibits. | ||
99.1 | Press release announcing third quarter financial results issued on October 31, 2016, by Tesoro Corporation. |
TESORO CORPORATION | ||||
By: | /s/ STEVEN M. STERIN | |||
Steven M. Sterin | ||||
Executive Vice President and Chief Financial Officer | ||||
Exhibit Number | Description | |
99.1 | Press release announcing third quarter financial results issued on October 31, 2016, by Tesoro Corporation. |
• | Net earnings from continuing operations of $170 million, or $1.43 per diluted share, consolidated net earnings of $201 million and EBITDA of $577 million |
• | Total Refining throughput was 873 thousand barrels per day and utilization was 98% |
• | Logistics operating income grew 25% year-over-year to $133 million |
• | Marketing operating income of $273 million; total branded stations increased by 178 year-over-year |
• | Returned $215 million to shareholders; $150 million in share repurchases and $65 million in dividends |
• | Closed sale of Alaska Storage and Terminalling Assets to TLLP for $444 million |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(In millions, except per share data) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Segment Operating Income | |||||||||||||||
Refining | $ | 52 | $ | 899 | $ | 475 | $ | 1,843 | |||||||
TLLP | 133 | 106 | 381 | 312 | |||||||||||
Marketing | 273 | 379 | 661 | 724 | |||||||||||
Total Segment Operating Income | $ | 458 | $ | 1,384 | $ | 1,517 | $ | 2,879 | |||||||
Net Earnings From Continuing Operations Attributable to Tesoro | $ | 170 | $ | 759 | $ | 646 | $ | 1,490 | |||||||
Diluted EPS - Continuing Operations | $ | 1.43 | $ | 6.13 | $ | 5.37 | $ | 11.85 | |||||||
Diluted EPS - Discontinued Operations | (0.01 | ) | — | 0.08 | (0.03 | ) | |||||||||
Total Diluted EPS | $ | 1.42 | $ | 6.13 | $ | 5.45 | $ | 11.82 |
Tesoro Corporation | 1 |
Tesoro Corporation | 2 |
Tesoro Corporation | 3 |
(a) | As a performance benchmark, we utilize crack spreads and the Tesoro Index to measure the difference between market prices for crude oil and refined products. Crack spreads are a commonly used proxy within the industry to estimate or identify trends in gross refining margins, while the Tesoro Index is more specifically designed around Tesoro’s assets. Crack spreads and the Tesoro Index can fluctuate significantly over time as a result of market conditions and supply and demand balances. For example, The West Coast 321 crack spread is calculated using three barrels of Alaska North Slope crude oil (ANS) producing two barrels of Los Angeles CARB gasoline and one barrel of Los Angeles CARB diesel. In comparison the Tesoro Index uses several crude oils and approximately 8 to 10 products to provide a potentially closer representation of the trends in the available margin. Our actual gross refining margins differ from these crack spreads and the Tesoro Index based on the actual slate of crude oil we run at our refineries and the products we produce or yield. |
Tesoro Corporation | 4 |
Throughput (Mbpd) | |
California | 500 - 525 |
Pacific Northwest | 180 - 190 |
Mid-Continent | 125 - 140 |
Consolidated | 805 - 855 |
Manufacturing Cost ($/throughput barrel) | |
California | $6.20 - 6.45 |
Pacific Northwest | $3.90 - 4.15 |
Mid-Continent | $4.65 - 4.90 |
Consolidated | $5.45 - 5.70 |
Corporate/System ($ millions) | |
Refining depreciation | $150 |
TLLP depreciation | $50 |
Corporate expense (before depreciation) | $95 - 105 |
Interest expense (before interest income) | $72 |
Noncontrolling Interest | $35 - 40 |
2016 Capital Expenditures Outlook | |||
Capital Expenditures | |||
Tesoro Corporation | $ | 700 | |
Tesoro Logistics LP | 200 | ||
Total Capital Expenditures | $ | 900 |
Tesoro Corporation | 5 |
• | U.S. GAAP-based net earnings before interest, income taxes, and depreciation and amortization expenses (“EBITDA”); |
• | Segment EBITDA is defined as a segment’s U.S. GAAP operating income before depreciation and amortization expenses plus equity in earnings (loss) of equity method investments and other income (expense), net; and |
• | Debt to capitalization ratio excluding TLLP, reflects the ratio achieved by dividing the net result of our consolidated debt less all debt owed by TLLP (both net of unamortized issuance costs) by the sum of our consolidated debt less TLLP’s total debt (both net of unamortized issuance costs) and our total equity less noncontrolling interest associated with the public ownership of TLLP. |
• | our operating performance as compared to other publicly traded companies in the refining, logistics and marketing industries, without regard to historical cost basis or financing methods; |
• | our ability to incur and service debt and fund capital expenditures; and |
• | the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities. |
Tesoro Corporation | 6 |
September 30, 2016 | December 31, 2015 | ||||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents (TLLP: $497 and $16, respectively) | $ | 1,387 | $ | 942 | |||
Receivables, net of allowance for doubtful accounts | 1,037 | 792 | |||||
Inventories, net (b) | 2,317 | 2,302 | |||||
Prepayments and other current assets | 364 | 271 | |||||
Total Current Assets | 5,105 | 4,307 | |||||
Property, Plant and Equipment, Net (TLLP: $3,129 and $3,467, respectively) | 9,769 | 9,541 | |||||
Other Noncurrent Assets, Net (TLLP: $1,447 and $1,190, respectively) | 3,131 | 2,484 | |||||
Total Assets | $ | 18,005 | $ | 16,332 | |||
LIABILITIES AND EQUITY | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 1,547 | $ | 1,568 | |||
Other current liabilities | 1,146 | 962 | |||||
Total Current Liabilities | 2,693 | 2,530 | |||||
Deferred Income Taxes | 1,438 | 1,222 | |||||
Other Noncurrent Liabilities | 1,012 | 773 | |||||
Debt, Net of Unamortized Issuance Costs (TLLP: $3,382 and $2,844, respectively) | 4,667 | 4,067 | |||||
Equity | 8,195 | 7,740 | |||||
Total Liabilities and Equity | $ | 18,005 | $ | 16,332 |
(b) | We recorded a lower of cost or market (“LCM”) reserve of $123 million and $359 million at September 30, 2016 and December 31, 2015, respectively, to cost of sales for our crude oil, refined products, oxygenates and by-product inventories to adjust carrying value of our inventories to reflect replacement cost as of those reporting dates. |
Tesoro Corporation | 7 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | $ | 6,544 | $ | 7,743 | $ | 17,930 | $ | 22,438 | |||||||
Costs and Expenses: | |||||||||||||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 5,232 | 5,429 | 14,114 | 17,090 | |||||||||||
Lower of cost or market inventory valuation adjustment (b) | (20 | ) | 83 | (236 | ) | 41 | |||||||||
Operating expenses | 652 | 640 | 1,872 | 1,816 | |||||||||||
Selling, general and administrative expenses (c) | 107 | 103 | 283 | 285 | |||||||||||
Depreciation and amortization expenses | 211 | 192 | 633 | 553 | |||||||||||
Loss on asset disposals and impairments | 2 | 4 | 7 | 12 | |||||||||||
Operating Income | 360 | 1,292 | 1,257 | 2,641 | |||||||||||
Interest and financing costs, net | (70 | ) | (54 | ) | (190 | ) | (163 | ) | |||||||
Equity in earnings of equity method investments | 7 | 6 | 12 | 9 | |||||||||||
Other income, net (d) | — | 13 | 32 | 12 | |||||||||||
Earnings Before Income Taxes | 297 | 1,257 | 1,111 | 2,499 | |||||||||||
Income tax expense | 95 | 458 | 362 | 888 | |||||||||||
Net Earnings From Continuing Operations | 202 | 799 | 749 | 1,611 | |||||||||||
Earnings (loss) from discontinued operations, net of tax | (1 | ) | — | 10 | (4 | ) | |||||||||
Net Earnings | 201 | 799 | 759 | 1,607 | |||||||||||
Less: Net earnings from continuing operations attributable to noncontrolling interest | 32 | 40 | 103 | 121 | |||||||||||
Net Earnings Attributable to Tesoro Corporation | $ | 169 | $ | 759 | $ | 656 | $ | 1,486 | |||||||
Net Earnings (Loss) Attributable to Tesoro Corporation: | |||||||||||||||
Continuing operations | $ | 170 | $ | 759 | $ | 646 | $ | 1,490 | |||||||
Discontinued operations | (1 | ) | — | 10 | (4 | ) | |||||||||
Total | $ | 169 | $ | 759 | $ | 656 | $ | 1,486 | |||||||
Net Earnings (Loss) Per Share - Basic: | |||||||||||||||
Continuing operations | $ | 1.44 | $ | 6.19 | $ | 5.43 | $ | 11.98 | |||||||
Discontinued operations | (0.01 | ) | — | 0.08 | (0.03 | ) | |||||||||
Total | $ | 1.43 | $ | 6.19 | $ | 5.51 | $ | 11.95 | |||||||
Weighted average common shares outstanding - Basic | 118.2 | 122.5 | 119.1 | 124.3 | |||||||||||
Net Earnings (Loss) Per Share - Diluted: | |||||||||||||||
Continuing operations | $ | 1.43 | $ | 6.13 | $ | 5.37 | $ | 11.85 | |||||||
Discontinued operations | (0.01 | ) | — | 0.08 | (0.03 | ) | |||||||||
Total | $ | 1.42 | $ | 6.13 | $ | 5.45 | $ | 11.82 | |||||||
Weighted average common shares outstanding - Diluted | 119.3 | 123.8 | 120.4 | 125.7 |
(c) | Includes stock-based compensation expense of $13 million and $22 million for the three months ended September 30, 2016 and 2015, respectively, and expense of $21 million and $57 million for the nine months ended September 30, 2016 and 2015, respectively. The significant impact to stock-based compensation expense is primarily a result of changes in Tesoro’s stock price. |
(d) | Other income, net for the nine months ended September 30, 2016 included insurance proceeds related to a shipment of contaminated crude oil that was received in 2014 as well as a refund of certain tariff charges that were disputed. Additionally, a gain recognized by TLLP on a settlement of amounts disputed by one of its customers on the annual calculation of the natural gas gathering rate is included for the nine months ended September 30, 2016. During the three and nine months ended September 30, 2015, we recorded a gain of $11 million as other income for insurance proceeds related to the settlement of claims associated with the Washington Refinery Fire. |
Tesoro Corporation | 8 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Earnings Before Income Taxes | |||||||||||||||
Refining | $ | 52 | $ | 899 | $ | 475 | $ | 1,843 | |||||||
TLLP | 133 | 106 | 381 | 312 | |||||||||||
Marketing | 273 | 379 | 661 | 724 | |||||||||||
Total Segment Operating Income | 458 | 1,384 | 1,517 | 2,879 | |||||||||||
Corporate and unallocated costs (c) | (98 | ) | (92 | ) | (260 | ) | (238 | ) | |||||||
Operating Income | 360 | 1,292 | 1,257 | 2,641 | |||||||||||
Interest and financing costs, net | (70 | ) | (54 | ) | (190 | ) | (163 | ) | |||||||
Equity in earnings of equity method investments | 7 | 6 | 12 | 9 | |||||||||||
Other income, net (d) | — | 13 | 32 | 12 | |||||||||||
Earnings Before Income Taxes | $ | 297 | $ | 1,257 | $ | 1,111 | $ | 2,499 | |||||||
Depreciation and Amortization Expenses | |||||||||||||||
Refining | $ | 148 | $ | 133 | $ | 445 | $ | 373 | |||||||
TLLP | 45 | 45 | 134 | 133 | |||||||||||
Marketing | 12 | 11 | 36 | 34 | |||||||||||
Corporate | 6 | 3 | 18 | 13 | |||||||||||
Total Depreciation and Amortization Expenses | $ | 211 | $ | 192 | $ | 633 | $ | 553 | |||||||
Segment EBITDA | |||||||||||||||
Refining | $ | 204 | $ | 1,036 | $ | 947 | $ | 2,219 | |||||||
TLLP | 181 | 153 | 531 | 451 | |||||||||||
Marketing | 285 | 390 | 697 | 758 | |||||||||||
Total Segment EBITDA | $ | 670 | $ | 1,579 | $ | 2,175 | $ | 3,428 | |||||||
Capital Expenditures | |||||||||||||||
Refining | $ | 153 | $ | 152 | $ | 409 | $ | 483 | |||||||
TLLP | 42 | 93 | 125 | 237 | |||||||||||
Marketing | 3 | 8 | 22 | 20 | |||||||||||
Corporate | 29 | 6 | 68 | 16 | |||||||||||
Total Capital Expenditures | $ | 227 | $ | 259 | $ | 624 | $ | 756 |
Tesoro Corporation | 9 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Reconciliation of Net Earnings to EBITDA | |||||||||||||||
Net earnings | $ | 201 | $ | 799 | $ | 759 | $ | 1,607 | |||||||
Depreciation and amortization expenses | 211 | 192 | 633 | 553 | |||||||||||
Interest and financing costs, net | 70 | 54 | 190 | 163 | |||||||||||
Income tax expense | 95 | 458 | 362 | 888 | |||||||||||
EBITDA | $ | 577 | $ | 1,503 | $ | 1,944 | $ | 3,211 |
Reconciliation of Refining Operating Income to Refining Segment EBITDA | |||||||||||||||
Operating income | $ | 52 | $ | 899 | $ | 475 | $ | 1,843 | |||||||
Depreciation and amortization expenses | 148 | 133 | 445 | 373 | |||||||||||
Equity in earnings of equity method investments | 4 | 4 | 2 | 3 | |||||||||||
Other income, net (d) | — | — | 25 | — | |||||||||||
Segment EBITDA | $ | 204 | $ | 1,036 | $ | 947 | $ | 2,219 | |||||||
Reconciliation of TLLP Operating Income to TLLP Segment EBITDA | |||||||||||||||
Operating income | $ | 133 | $ | 106 | $ | 381 | $ | 312 | |||||||
Depreciation and amortization expenses | 45 | 45 | 134 | 133 | |||||||||||
Equity in earnings of equity method investments | 3 | 2 | 10 | 6 | |||||||||||
Other income, net (d) | — | — | 6 | — | |||||||||||
Segment EBITDA | $ | 181 | $ | 153 | $ | 531 | $ | 451 | |||||||
Reconciliation of Marketing Operating Income to Marketing Segment EBITDA | |||||||||||||||
Operating income | $ | 273 | $ | 379 | $ | 661 | $ | 724 | |||||||
Depreciation and amortization expenses | 12 | 11 | 36 | 34 | |||||||||||
Segment EBITDA | $ | 285 | $ | 390 | $ | 697 | $ | 758 |
Tesoro Corporation | 10 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash Flows From (Used in): | |||||||||||||||
Operating activities | $ | 573 | $ | 940 | $ | 1,201 | $ | 1,847 | |||||||
Investing activities | (214 | ) | (235 | ) | (1,020 | ) | (783 | ) | |||||||
Financing activities | (93 | ) | (724 | ) | 264 | (1,105 | ) | ||||||||
Increase (Decrease) in Cash and Cash Equivalents | $ | 266 | $ | (19 | ) | $ | 445 | $ | (41 | ) | |||||
September 30, 2016 | December 31, 2015 | ||||||||||||||
Working capital (current assets less current liabilities) | $ | 2,412 | $ | 1,777 | |||||||||||
Total market value of TLLP common units held by Tesoro (e) | $ | 1,608 | $ | 1,633 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash distributions received from TLLP (f): | |||||||||||||||
For common units held | $ | 27 | $ | 20 | $ | 79 | $ | 58 | |||||||
For general partner units held | 38 | 18 | 95 | 48 | |||||||||||
Total Cash Distributions Received from TLLP | $ | 65 | $ | 38 | $ | 174 | $ | 106 |
September 30, 2016 | December 31, 2015 | ||||||
Tesoro consolidated debt (g) | $ | 4,682 | $ | 4,073 | |||
TLLP debt (g) | 3,382 | 2,844 | |||||
Tesoro Debt Excluding TLLP (g) | $ | 1,300 | $ | 1,229 | |||
Total equity | $ | 8,195 | $ | 7,740 | |||
Noncontrolling interest | 2,695 | 2,527 | |||||
Tesoro Corporation Stockholders’ Equity | $ | 5,500 | $ | 5,213 | |||
Tesoro debt, net of unamortized issuance costs, to capitalization ratio (g) | 36 | % | 34 | % | |||
Tesoro debt, net of unamortized issuance costs, to capitalization ratio excluding TLLP and noncontrolling interest (g) | 19 | % | 19 | % |
(e) | Represents market value of the 33,194,109 and 32,445,115 common units held by Tesoro at September 30, 2016 and December 31, 2015, respectively. The market values were $48.44 and $50.32 per unit based on the closing unit price at September 30, 2016 and December 31, 2015, respectively. |
(f) | Represents distributions received from TLLP during the three and nine months ended September 30, 2016 and 2015 on common units and general partner units held by Tesoro. |
(g) | These amounts and calculations are shown net of unamortized issuance costs. |
Tesoro Corporation | 11 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
REFINING SEGMENT | 2016 | 2015 | 2016 | 2015 | |||||||||||
Total Refining Segment | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (h) | 186 | 178 | 176 | 150 | |||||||||||
Light crude | 636 | 635 | 595 | 575 | |||||||||||
Other feedstocks | 51 | 48 | 49 | 56 | |||||||||||
Total Throughput | 873 | 861 | 820 | 781 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 455 | 438 | 449 | 405 | |||||||||||
Diesel fuel | 202 | 195 | 183 | 166 | |||||||||||
Jet fuel | 133 | 122 | 117 | 119 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 143 | 158 | 126 | 140 | |||||||||||
Total Yield | 933 | 913 | 875 | 830 | |||||||||||
Refined Product Sales (Mbpd) (i) | |||||||||||||||
Gasoline and gasoline blendstocks | 531 | 530 | 527 | 510 | |||||||||||
Diesel fuel | 215 | 213 | 204 | 198 | |||||||||||
Jet fuel | 158 | 148 | 145 | 153 | |||||||||||
Heavy fuel oils, residual products and other | 112 | 101 | 105 | 91 | |||||||||||
Total Refined Product Sales | 1,016 | 992 | 981 | 952 | |||||||||||
Revenues | |||||||||||||||
Refined products (j) | $ | 5,641 | $ | 6,817 | $ | 15,434 | $ | 19,867 | |||||||
Crude oil resales and other | 257 | 172 | 710 | 780 | |||||||||||
Refining Revenues | 5,898 | 6,989 | 16,144 | 20,647 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding lower of cost or market adjustments) | 5,189 | 5,367 | 13,965 | 16,934 | |||||||||||
Lower of cost or market adjustments (b) | (20 | ) | 83 | (236 | ) | 41 | |||||||||
Refining cost of sales | 5,169 | 5,450 | 13,729 | 16,975 | |||||||||||
Gross refining margin (k) | 729 | 1,539 | 2,415 | 3,672 | |||||||||||
Expenses | |||||||||||||||
Operating expenses | |||||||||||||||
Manufacturing costs | 412 | 383 | 1,172 | 1,177 | |||||||||||
Other operating expenses | 116 | 117 | 318 | 259 | |||||||||||
Selling, general and administrative expenses | 1 | 5 | 5 | 12 | |||||||||||
Depreciation and amortization expenses | 148 | 133 | 445 | 373 | |||||||||||
Loss on asset disposals and impairments | — | 2 | — | 8 | |||||||||||
Segment Operating Income | $ | 52 | $ | 899 | $ | 475 | $ | 1,843 | |||||||
Gross Refining Margin ($/throughput barrel) (l) (m) | $ | 9.08 | $ | 19.43 | $ | 10.75 | $ | 17.22 | |||||||
Manufacturing Cost before Depreciation and Amortization Expenses ($/throughput barrel) (l) | $ | 5.11 | $ | 4.84 | $ | 5.22 | $ | 5.53 |
(h) | We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less. |
(i) | Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties. |
Tesoro Corporation | 12 |
(j) | Refined product sales include intersegment sales to our Marketing segment of $3.6 billion and $4.5 billion for the three months ended September 30, 2016 and 2015, respectively, and $10.2 billion and $12.8 billion for the nine months ended September 30, 2016 and 2015, respectively. |
(k) | Gross refining margin approximates total refining throughput multiplied by the gross refining margin per barrel. Consolidated gross refining margin combines gross refining margin for each of our regions adjusted for other amounts not directly attributable to a specific region. Gross refining margin includes the effect of intersegment sales to the Marketing segment and services provided by TLLP. Gross refining margin reflects the incremental expense or benefit associated with the LCM adjustments for all periods presented. |
(l) | Management uses various measures to evaluate performance and efficiency and to compare profitability to other companies in the industry, including gross refining margin per barrel, manufacturing costs before depreciation and amortization expenses (“Manufacturing Costs”) per barrel. We calculate gross refining margin per barrel by dividing gross refining margin (revenues for manufactured refined products sold less costs of feedstocks, purchased refined products, transportation and distribution) by total refining throughput. We calculate Manufacturing Costs per barrel by dividing Manufacturing Costs by total refining throughput. |
(m) | Gross refining margin per throughput barrel on a consolidated and regional basis includes the incremental expense or benefit associated with the LCM adjustments for all periods presented. |
Tesoro Corporation | 13 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
Refining By Region | 2016 | 2015 | 2016 | 2015 | |||||||||||
California (Martinez and Los Angeles) | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (h) | 177 | 172 | 170 | 144 | |||||||||||
Light crude | 321 | 328 | 301 | 313 | |||||||||||
Other feedstocks | 35 | 34 | 33 | 37 | |||||||||||
Total Throughput | 533 | 534 | 504 | 494 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 297 | 279 | 293 | 265 | |||||||||||
Diesel fuel | 120 | 111 | 107 | 98 | |||||||||||
Jet fuel | 79 | 76 | 71 | 76 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 86 | 109 | 78 | 94 | |||||||||||
Total Yield | 582 | 575 | 549 | 533 | |||||||||||
Revenues | |||||||||||||||
Refined products (j) | $ | 3,680 | $ | 4,525 | $ | 10,358 | $ | 13,501 | |||||||
Crude oil resales and other (n) | 55 | 94 | 157 | 233 | |||||||||||
Regional Revenue | 3,735 | 4,619 | 10,515 | 13,734 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding LCM) (n) | 3,292 | 3,547 | 9,076 | 11,296 | |||||||||||
LCM | (10 | ) | 56 | (154 | ) | 26 | |||||||||
Regional Cost of Sales | 3,282 | 3,603 | 8,922 | 11,322 | |||||||||||
Gross refining margin (k) | 453 | 1,016 | 1,593 | 2,412 | |||||||||||
Expenses | |||||||||||||||
Manufacturing costs | 285 | 284 | 823 | 851 | |||||||||||
Other operating expenses | 57 | 78 | 152 | 164 | |||||||||||
Selling, general and administrative expenses | 1 | 5 | 4 | 11 | |||||||||||
Depreciation and amortization expenses | 95 | 88 | 285 | 249 | |||||||||||
Loss on asset disposals and impairments | — | 1 | — | 3 | |||||||||||
Operating Income | $ | 15 | $ | 560 | $ | 329 | $ | 1,134 | |||||||
Gross Refining Margin ($/throughput barrel) (l) (m) | $ | 9.24 | $ | 20.68 | $ | 11.54 | $ | 17.88 | |||||||
Manufacturing Cost before Depreciation and Amortization Expenses ($/throughput barrel) (l) | $ | 5.79 | $ | 5.79 | $ | 5.97 | $ | 6.32 | |||||||
Capital Expenditures | $ | 91 | $ | 85 | $ | 244 | $ | 198 |
Tesoro Corporation | 14 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Pacific Northwest (Washington and Alaska) | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (h) | 9 | 6 | 6 | 6 | |||||||||||
Light crude | 171 | 177 | 161 | 147 | |||||||||||
Other feedstocks | 11 | 9 | 11 | 15 | |||||||||||
Total Throughput | 191 | 192 | 178 | 168 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 79 | 84 | 79 | 74 | |||||||||||
Diesel fuel | 37 | 41 | 34 | 31 | |||||||||||
Jet fuel | 40 | 36 | 34 | 33 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 42 | 38 | 36 | 36 | |||||||||||
Total Yield | 198 | 199 | 183 | 174 | |||||||||||
Revenues | |||||||||||||||
Refined products (j) | $ | 1,146 | $ | 1,332 | $ | 2,934 | $ | 3,771 | |||||||
Crude oil resales and other (n) | 89 | 53 | 175 | 314 | |||||||||||
Regional Revenue | 1,235 | 1,385 | 3,109 | 4,085 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding LCM) (n) | 1,117 | 1,129 | 2,778 | 3,434 | |||||||||||
LCM | (8 | ) | 18 | (60 | ) | 10 | |||||||||
Regional Cost of Sales | 1,109 | 1,147 | 2,718 | 3,444 | |||||||||||
Gross refining margin (k) | 126 | 238 | 391 | 641 | |||||||||||
Expenses | |||||||||||||||
Manufacturing costs | 69 | 59 | 190 | 181 | |||||||||||
Other operating expenses | 16 | 20 | 43 | 48 | |||||||||||
Selling, general and administrative expenses | — | — | 1 | — | |||||||||||
Depreciation and amortization expenses | 24 | 24 | 69 | 64 | |||||||||||
Loss on asset disposals and impairments | — | 1 | — | 1 | |||||||||||
Operating Income | $ | 17 | $ | 134 | $ | 88 | $ | 347 | |||||||
Gross Refining Margin ($/throughput barrel) (l) (m) | $ | 7.17 | $ | 13.47 | $ | 8.02 | $ | 13.98 | |||||||
Manufacturing Cost before Depreciation and Amortization Expenses ($/throughput barrel) (l) | $ | 3.87 | $ | 3.35 | $ | 3.87 | $ | 3.97 | |||||||
Capital Expenditures | $ | 29 | $ | 32 | $ | 95 | $ | 87 |
(n) | Certain of our foreign operations that are typically reported with our Pacific Northwest region were erroneously reported in our California region during the three and six months ended June 30, 2016 and 2015 with no impact on regional or consolidated gross refining margins presented for those periods. For the three and nine month periods ended September 30, 2016 and 2015 presented above, those foreign operations are reported in the correct regions impacting comparability period over period. |
Tesoro Corporation | 15 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Mid-Continent (North Dakota and Utah) | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Light crude | 144 | 130 | 133 | 115 | |||||||||||
Other feedstocks | 5 | 5 | 5 | 4 | |||||||||||
Total Throughput | 149 | 135 | 138 | 119 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 79 | 75 | 77 | 66 | |||||||||||
Diesel fuel | 45 | 43 | 42 | 37 | |||||||||||
Jet fuel | 14 | 10 | 12 | 10 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 15 | 11 | 12 | 10 | |||||||||||
Total Yield | 153 | 139 | 143 | 123 | |||||||||||
Revenues | |||||||||||||||
Refined products (j) | $ | 815 | $ | 960 | $ | 2,142 | $ | 2,595 | |||||||
Crude oil resales and other | 113 | 25 | 378 | 233 | |||||||||||
Regional Revenue | 928 | 985 | 2,520 | 2,828 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding LCM) | 780 | 691 | 2,111 | 2,204 | |||||||||||
LCM | (2 | ) | 9 | (22 | ) | 5 | |||||||||
Regional Cost of Sales | 778 | 700 | 2,089 | 2,209 | |||||||||||
Gross refining margin (k) | 150 | 285 | 431 | 619 | |||||||||||
Expenses | |||||||||||||||
Manufacturing costs | 58 | 40 | 159 | 145 | |||||||||||
Other operating expenses | 43 | 19 | 123 | 47 | |||||||||||
Selling, general and administrative expenses | — | — | — | 1 | |||||||||||
Depreciation and amortization expenses | 29 | 21 | 91 | 60 | |||||||||||
Loss on asset disposals and impairments | — | — | — | 4 | |||||||||||
Operating Income | $ | 20 | $ | 205 | $ | 58 | $ | 362 | |||||||
Gross Refining Margin ($/throughput barrel) (l) (m) | $ | 10.94 | $ | 22.95 | $ | 11.40 | $ | 19.05 | |||||||
Manufacturing Cost before Depreciation and Amortization Expenses ($/throughput barrel) (l) | $ | 4.27 | $ | 3.19 | $ | 4.21 | $ | 4.45 | |||||||
Capital Expenditures | $ | 33 | $ | 35 | $ | 70 | $ | 198 |
Tesoro Corporation | 16 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
TLLP SEGMENT | 2016 | 2015 | 2016 | 2015 | |||||||||||
Gathering | |||||||||||||||
Gas gathering throughput (thousands of MMBtu/day) (o) | 887 | 1,115 | 881 | 1,069 | |||||||||||
Average gas gathering revenue per MMBtu (o) | $ | 0.48 | $ | 0.45 | $ | 0.51 | $ | 0.44 | |||||||
Crude oil gathering pipeline throughput (Mbpd) | 206 | 199 | 210 | 182 | |||||||||||
Average crude oil gathering pipeline revenue per barrel | $ | 1.71 | $ | 1.71 | $ | 1.73 | $ | 1.77 | |||||||
Crude oil trucking volume (Mbpd) | 32 | 34 | 30 | 42 | |||||||||||
Average crude oil trucking revenue per barrel | $ | 3.25 | $ | 3.14 | $ | 3.26 | $ | 3.24 | |||||||
Processing | |||||||||||||||
NGLs processing throughput (Mbpd) | 6.7 | 7.8 | 7.4 | 7.5 | |||||||||||
Average keep-whole fee per barrel of NGLs | $ | 38.35 | $ | 35.75 | $ | 36.58 | $ | 34.26 | |||||||
Fee-based processing throughput (thousands of MMBtu/ day) | 625 | 767 | 648 | 742 | |||||||||||
Average fee-based processing revenue per MMBtu | $ | 0.50 | $ | 0.39 | $ | 0.45 | $ | 0.40 | |||||||
Terminalling and Transportation | |||||||||||||||
Terminalling throughput (Mbpd) | 1,023 | 964 | 998 | 932 | |||||||||||
Average terminalling revenue per barrel | $ | 1.33 | $ | 1.05 | $ | 1.27 | $ | 1.08 | |||||||
Pipeline transportation throughput (Mbpd) | 908 | 838 | 866 | 819 | |||||||||||
Average pipeline transportation revenue per barrel | $ | 0.38 | $ | 0.40 | $ | 0.39 | $ | 0.39 | |||||||
Segment Operating Income | |||||||||||||||
Revenues | |||||||||||||||
Gathering | |||||||||||||||
Gas gathering | $ | 39 | $ | 46 | $ | 122 | $ | 128 | |||||||
Crude oil gathering pipeline | 33 | 31 | 100 | 88 | |||||||||||
Crude oil trucking | 9 | 10 | 27 | 37 | |||||||||||
Other | 1 | — | 6 | — | |||||||||||
Processing | |||||||||||||||
NGLs processing | 23 | 26 | 74 | 71 | |||||||||||
Fee-based processing | 29 | 28 | 80 | 81 | |||||||||||
Other processing | 17 | 17 | 54 | 53 | |||||||||||
Terminalling and transportation | |||||||||||||||
Terminalling | 125 | 93 | 345 | 275 | |||||||||||
Pipeline transportation | 32 | 31 | 93 | 87 | |||||||||||
TLLP Revenues (p) | 308 | 282 | 901 | 820 | |||||||||||
Expenses | |||||||||||||||
Operating expenses (q) | 104 | 103 | 313 | 294 | |||||||||||
General and administrative expenses (r) | 24 | 28 | 70 | 81 | |||||||||||
Depreciation and amortization expenses | 45 | 45 | 134 | 133 | |||||||||||
Gain on asset disposals and impairments | 2 | — | 3 | — | |||||||||||
Segment Operating Income | $ | 133 | $ | 106 | $ | 381 | $ | 312 |
(o) | Prior to the deconsolidation of Rendezvous Gas Services, L.L.C. (“RGS”) as of January 1, 2016, fees paid by TLLP to RGS were eliminated upon consolidation and third-party transactions, including revenue and throughput volumes, were included in TLLP’s results of operations. Third party volumes associated with RGS, included in gas gathering volume for the three and nine months ended September 30, 2015, were 142 thousand and 145 thousand MMBtu/d and reduced our average gas gathering revenue per MMBtu for both periods by $0.05. |
Tesoro Corporation | 17 |
(p) | TLLP segment revenues from services provided to our Refining segment were $184 million and $152 million for the three months ended September 30, 2016 and 2015, respectively, and $521 million and $454 million for the nine months ended September 30, 2016 and 2015, respectively. These amounts are eliminated upon consolidation. |
(q) | TLLP segment operating expenses include amounts billed by Tesoro for services provided to TLLP under various operational contracts. Amounts billed by Tesoro totaled $40 million and $33 million for the three months ended September 30, 2016 and 2015, respectively, and $113 million and $93 million for the nine months ended September 30, 2016 and 2015, respectively. Operating expenses also include imbalance gains and reimbursements pursuant to the Amended Omnibus Agreement of $5 million and $12 million for the three months ended September 30, 2016 and 2015, respectively, and $17 million and $31 million for the nine months ended September 30, 2016 and 2015, respectively. These amounts are eliminated upon consolidation. TLLP segment third-party operating expenses related to the transportation of crude oil and refined products related to Tesoro’s sale of those refined products during the ordinary course of business are reclassified to cost of sales in our condensed statements of consolidated operations upon consolidation. |
(r) | TLLP segment general and administrative expenses include amounts charged by Tesoro for general and administrative services provided to TLLP under various operational and administrative contracts. These amounts totaled $18 million and $16 million for the three months ended September 30, 2016 and 2015, respectively, and $51 million for both the nine months ended September 30, 2016 and 2015, respectively, and are eliminated upon consolidation. General and administrative expenses are reclassified to cost of sales as it relates to Tesoro’s sale of refined products in our condensed statements of consolidated operations upon consolidation. |
Tesoro Corporation | 18 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
MARKETING SEGMENT | 2016 | 2015 | 2016 | 2015 | |||||||||||
Revenues | |||||||||||||||
Fuel | $ | 4,118 | $ | 5,144 | $ | 11,493 | $ | 14,143 | |||||||
Other non-fuel | 23 | 16 | 65 | 48 | |||||||||||
Total Revenues | 4,141 | 5,160 | 11,558 | 14,191 | |||||||||||
Cost of Sales | |||||||||||||||
Fuel | 3,773 | 4,684 | 10,612 | 13,192 | |||||||||||
Other non-fuel | 5 | — | 13 | 3 | |||||||||||
Total Cost of Sales | 3,778 | 4,684 | 10,625 | 13,195 | |||||||||||
Gross Margin | |||||||||||||||
Fuel (s) | 345 | 460 | 881 | 951 | |||||||||||
Other non-fuel | 18 | 16 | 52 | 45 | |||||||||||
Total Gross Margins | 363 | 476 | 933 | 996 | |||||||||||
Expenses | |||||||||||||||
Operating expenses | 73 | 82 | 221 | 223 | |||||||||||
Selling, general and administrative expenses | 5 | 3 | 12 | 12 | |||||||||||
Depreciation and amortization expenses | 12 | 11 | 36 | 34 | |||||||||||
Loss on asset disposals and impairments | — | 1 | 3 | 3 | |||||||||||
Segment Operating Income | $ | 273 | $ | 379 | $ | 661 | $ | 724 | |||||||
Fuel Sales (millions of gallons) | 2,311 | 2,249 | 6,698 | 6,408 | |||||||||||
Fuel Margin (¢/gallon) (s) | 14.9 | ¢ | 20.5 | ¢ | 13.2 | ¢ | 14.8 | ¢ | |||||||
Number of Branded Stations (at the end of the period) | |||||||||||||||
MSO operated | 590 | 579 | |||||||||||||
Jobber/Dealer operated | 1,877 | 1,710 | |||||||||||||
Total Stations | 2,467 | 2,289 |
(s) | Management uses fuel margin per gallon to compare fuel results to other companies in the industry. There are a variety of ways to calculate fuel margin per gallon and different companies may calculate it in different ways. We calculate fuel margin per gallon by dividing fuel gross margin by fuel sales volumes. Fuel margin and fuel margin per gallon include the effect of intersegment purchases from the Refining segment. |
Tesoro Corporation | 19 |
Northern California Assets Acquisition | ||
Reconciliation of Projected Net Earnings to Projected Annual EBITDA: | ||
Projected net earnings | $ 28 - 33 | |
Add: Depreciation and amortization expenses | 8 | |
Add: Interest and financing costs, net | 9 | |
Expected Annual EBITDA | $ 45 - 50 |
TLLP 2017 Annual Expected Segment EBITDA | |||
Reconciliation of Projected Operating Income to Projected Annual Segment EBITDA: | |||
Projected operating income | $ | 820 | |
Add: Depreciation and amortization expenses | 180 | ||
Projected Annual Segment EBITDA | $ | 1,000 |
Tesoro Corporation | 20 |
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